June 09, 2014

Looking Beyond the Job-Finding Rate: The Difficulty of Finding Full-Time Work

Despite Friday´s report of a further solid increase in payroll employment, the
utilization picture for the official labor force remains mixed. The rate of short-term and long-term unemployment as well as the share of the labor force working part time who want to work full time (a cohort also referred to as working part time for economic reasons, or PTER) rose during the recession.

The short-term unemployment rate has since returned to levels experienced before the recession. In contrast, longer-term unemployment and involuntary part-time work have declined, but both remain well above prerecession levels (see the chart).

Some of the postrecession decline in the short-term unemployment rate has not resulted from the short-term unemployed finding a job, but rather the opposite—they failed to get a job and became longer-term unemployed. Before the recession, the number of unemployed workers who said they
had been looking for a job for more than half a year accounted for about 18 percent of unemployed workers. Currently, that share is close to 36 percent.

Moreover, job finding by unemployed workers might not completely reflect a decline in the amount of slack labor resources if some want full-time work but only find part-time work (that is, are working PTER). In this post, we investigate the ability of the unemployed to become fully employed relative to their experience before the Great Recession.

The job-finding rate of unemployed workers (the share of unemployed who are employed the following month) generally decreases toward zero with the length of the unemployment spell. Job-finding rates fell for all durations of unemployment in the recession.

Since the end of the recession, job-finding rates have improved, especially for shorter-term unemployed, but remain well below prerecession levels. The overall job-finding rate stood at close to 28 percent in 2007 and was about 20 percent for the first four months of 2014. The chart below shows the job-finding rates for select years by unemployment duration:

What about the jobs that the unemployed find? Most unemployed workers want to work full-time hours (at least 35 hours a week). In 2007, around 75 percent of job finders wanted full-time work and either got full-time work or worked PTER (the remainder worked part time for noneconomic reasons). For the first four months of 2014, the share wanting full-time work was also about 75 percent. But the portion of job finders wanting full-time work and only finding part-time work increased from about 22 percent in 2007 to almost 30 percent in 2014, and this job-finding underutilization share has become especially high for the longer-term unemployed.

The chart below displays the job-finding underutilization share for select years by unemployment duration. (You can also read further analysis of PTER dynamics by our colleagues at the Federal Reserve Board of Governors.)

Finding a job is one thing, but finding a satisfactory job is another. Since the end of the recession, the number of unemployed has declined, thanks in part to a gradually improving rate of job finding. But the job-finding rate is still relatively low, and the ability of an unemployed job seeker who wants to work full-time to actually find full-time work remains a significant challenge.

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